Standing Committee A

[Mr. Win Griffiths in the Chair]

State Pension Credit Bill [Lords]

Tim Boswell: On a point of order, Mr. Griffiths. You will recall that at the end of our previous sitting we were discussing amendment No. 14. I had concluded my remarks and I do not intend to re-open that discussion. Can Ministers comment on the imputed calculation of income as a result of yesterday's Budget? Given that the Chancellor of the Exchequer has now scrapped that in respect of other tax credits, some commentators have said that the position of the pension credit is left exposed and anomalous. No doubt we will return to that matter when discussing later clauses so, in a sense, I am giving notice to Ministers that such issues will be raised then. Representatives of organisations that deal with older people have said that 5 million pensioners are likely to become involved in the system of income-related benefits. Can Ministers respond briefly to my concerns?

Win Griffiths: I am sure that the Ministers have heard your comments, Mr. Boswell. It would not be appropriate for them to respond immediately, but I am sure that something will be said during the debate.

Ian McCartney: Nothing that was announced by the Chancellor of the Exchequer yesterday or in his pre-Budget statement will affect the structure of the Bill or any matters relating to it. If there had been, the Government would have had to table amendments to the Bill. As the Committee will notice, we have tabled only one small technical amendment. We can rest assured that the job of the hon. Member for Daventry (Mr. Boswell) as Opposition spokesman has not been made any harder by changes that were announced in the Budget statement yesterday.

Andrew Selous: With respect, I think that the Minister is slightly missing the point made by my hon. Friend the Member for Daventry, which was that the treatment of earnings under the State Pension Credit Bill will now be different following the announcements made by the Chancellor yesterday in respect of other credits and arrangements for pensioners. My hon. Friend was referring to that particular aspect of the Budget.

Ian McCartney: I know exactly what the hon. Gentleman was saying. But nothing that was said yesterday affects the structure or the clauses of the Bill and resulting calculations.

Win Griffiths: I think that the Committee has exhausted that point of order. I am sure that we shall hear some questions on the matter later in our proceedings.



Clause 2Guarantee Credit

Guarantee Credit

Amendment proposed [16 April]: No. 14, in page 2, line 24 to leave out subsection (6).—[Mr. Boswell.] 
 Question again proposed, That the amendment be made.

Win Griffiths: I remind the Committee that with this we are taking amendment No. 3, in page 2, line 26, at end insert—
'(6A) Such regulations may not apply to hospital in-patients.'.

Steve Webb: Good morning, Mr. Griffiths. The purpose of amendment No. 3 is similar to that of amendment No. 14. That amendment would remove subsection (6), while our amendment would allow the Secretary of State the power to specify lower amounts, except in respect of hospital in-patients. That proposal is more narrow than amendment No. 14, because the explanatory notes to the Bill suggest that the Secretary of State needs powers to specify lower amounts, for example, in respect of prison inmates. Even I do not have a problem with a lower rate of pension credit for prison inmates. However, hospital in-patients should not be treated the same.
 We welcome the fact that the Government made a concession in another place. It is clearly a step in the right direction, but has it gone far enough? The issue is one of principle as well as one of pragmatism. The key question is whether the Bill should give the Secretary of State power to reduce guarantee credits for hospital in-patients. The Minister will no doubt say that it has been a feature of the welfare state since the war that people in hospital have their benefit cut, but because something has been going on since the war does not make it right. There has been an upper earnings limit on the national insurance system since it was established, but yesterday the Chancellor of the Exchequer breached that by taking national insurance beyond the upper earnings limit. That something has been in done for decades does not mean that it cannot or should not be reformed, and I hope that the Minister would not suggest that that is a reason for continuing with the system. 
 We have to examine the thinking behind the practice. The historic argument is that the state should not pay twice—in this case, by providing for patients in hospital and also paying their full pensions, or pension credits. They are being fed, sheltered and looked after while they are in hospital, which is part of what the pension credit is about. However, the Government have not produced any evidence about the extent, if any, of the double provision, so my first question is empirical—what evidence is there of double provision? Clearly, food would be an obvious example.

Tim Boswell: The hon. Gentleman may wish to intensify that point. When we have sought to require information in parliamentary questions relating to the distribution of the benefit, except for the global figure of relief of £40 million annually, it has been remarkably difficult to work out how many people are affected and for how long, and to determine the caseload on which information is based.
 Mr. Webb: I would certainly agree that there have been gaps in the detail. There has been a greater amount of detail concerning the numbers affected than the hon. Gentleman suggests, but the Department has hardly been overflowing with information about how such people are affected.
 I presume that the Under-Secretary will respond. Will she provide empirical evidence of research committed by the Department to determine the costs incurred by people in hospital and the costs saved because they are not living in their own homes? Obviously, they are not buying food while in hospital, so a slightly lower rate may be justified to account for that. However, how important are such items of expenditure compared with costs that roll on when one is in hospital, such as household insurance premiums, which may rise during an extended period of absence—insurance companies sometimes increase premiums if nobody is sleeping in the house? Many costs roll on regardless, such as standing charges on utilities—telephone bills, for example—and car insurance does not stop when one is in hospital. 
 What is the relative magnitude of the costs involved? If one took all costs faced by a pensioner, what is the balance between costs that continue when one is a long-term hospital in-patient and those that stop? If, as I rather suspect, a large proportion of costs continue and only a small amount is saved, that should inform any hospital downrating. 
 My second question is what costs increase during a hospital in-patient stay? If a person is married, the partner will want to visit regularly, which will incur additional travel costs, such as car parking charges. Hospitals in my constituency, like others, charge rates of approximately £3 a visit. The cost of visiting once a day would be some £20 a week, which is a substantial sum relative to the figures that we have been discussing. Such additional costs may offset any savings. 
 Pragmatically and empirically, have the Government commissioned research on the problem and demonstrated evidence? Frankly, the number of people involved when the system was established post-war was probably only a handful. Most people died before any downrating would have applied, which is no longer the case. People are likely to live longer now and have long in-patient stays. Harking back to the fact that downrating is a feature of the post-war welfare state does not prove the case. It affected far fewer people in a very different world. 
 Hospital downrating also involves an issue of principle that relates to benefits other than those in the Bill, so I will not dwell on that point. However, one may question whether we should be going down this track with regard to contributory benefits. For people who receive benefits for care needs, although the hospital provides care for in-patients, a carer may have to be retained and wages paid for the duration of the hospital stay.

Tim Boswell: I am grateful to the hon. Gentleman for giving way again. I hope that this will be the last
 intervention that I need make. He mentioned care needs. Does he agree that there might be inequity between people who are resident in hospital, and possibly blocking a bed, in the absence of other care provision, and those who have moved out of hospital and are resident in other accommodation? That, too, might give rise to inequities.

Steve Webb: The hon. Gentleman is right to raise the issue of bed blocking, which is entirely germane to the point, as I shall explain in a moment. I am not sure that the position of people in residential care is different, because their treatment under the pension credit will be complex. However, bed blocking matters, because the people with whom we are dealing are long-stay hospital in-patients. In a sense, they are, potentially, victims twice. Not only are they in hospital when they would like to get out—they are ready to do so, but the social care is not available—but, under clause 2(6), they will also have some of their money taken from them. People face a sort of double jeopardy. Once again, the phrase ''bed blocking'' had not been invented in 1948, but it is now part of the lexicon of everyday language.
 The matter involves issues of principle that relate to hospital downrating and apply especially to contributory benefits, and issues that relate to the Government's failure to extend the concession to care benefits, with which we should deal elsewhere. Means-tested benefits are designed to top-up people to a certain standard of living and ensure that they can maintain that standard of living. The matter involves arguments about double provision. I hope that the Minister will give us evidence of research that the Department has commissioned to measure the extent of that double provision and that suggests that there is a basis for the tendency to downrate. 
 Having spoken informally to Ministers elsewhere about why the Government did not go the whole hog and scrap hospital downrating, my impression was that it was not so much the people left—the victims of hospital downrating—who were the worry. It involves a thin-end-of-the-wedge argument. It was not the 6,000 people, or whatever the figure involved is, but the fact that, once we allow the principle of not downrating hospital in-patients, we have opened a Pandora's box. What other things are the Government worried about in accepting the principle? What other expenditure do they fear that they might incur? Where else in government might the principle be applied about which they are worried? Ministers have implied informally elsewhere that the reason is not so much those 6,000 but where it might lead. I hope that the Minister will fill us in on the empirical evidence on cost-saving and on the thin-end-of-the-wedge argument.

Maria Eagle: I shall be more than happy to do my best to answer the questions asked by the hon. Members for Daventry and for Northavon (Mr. Webb). I shall discuss the amendments in detail in due course, but I shall deal first with the substantive issue of hospital downrating. Both amendments are effectively about that, although they would have some strange other effects.
 Immediately following his appointment to his post, my right hon. Friend the Minister for Pensions started considering the issue. As long ago as last July, he told the National Pensioners Convention that he was doing so and from that time answered various parliamentary questions explaining that to the House, too. The matter has been driven by my right hon. Friend's interest when he was appointed to consider the issue, and it has been recognised that there is some strength in the argument relating to downrating after a certain period. 
 The hon. Member for Northavon is right to say that the grand principle behind the proposal relates to the issue of double provision. It remains a fundamental principle of the welfare state that the state does not provide twice for the same contingency. That sometimes resurfaces in other benefits for which I am responsible as the overlapping benefit rule. Those are not small matters, and ''Pandora's box'' is a useful phrase in considering changes to such fundamental principles in social security, as they often have extensive implications for other areas. 
 My right hon. Friend the Minister for Pensions spotted that problem and began to consider it as soon as he took on his current role in the Government. Consultations, discussions and his internal investigations resulted in the announcement on 25 February of proposals to change the way in which hospital downrating rules applied. The changes are collected under the State Pension Credit Bill because the downrating of pension credit will be the same. 
 Downrating will now take place after a 13-week stay in hospital instead of a six-week stay. Hon. Members should remember that that relates not only to pension credit but to a range of other benefits. However, we are now talking about the effect on pension credit. There will be a further reduction at 52 weeks. There will be no reduction before 13 weeks in hospital. After that, the single person's standard minimum guarantee will be reduced by an amount equivalent to 38 per cent. of the basic state retirement pension, with a further reduction to 20 per cent. of the state pension after 52 weeks. For couples, the downratings will be 20 per cent. at 13 weeks, and the claim is disaggregated at 52 weeks. That applies only to pension credit, as the savings credit will not be downrated. 
 I took care to take a note of the questions that the hon. Member for Daventry asked on Tuesday about the subject. He asked whether we had been dragooned, to use his word, into relaxing the downrating rules so that they apply at 13 weeks. I should prefer to say that my right hon. Friend the Minister took an interest in the matter from the time of his appointment. After considering the issue, he decided to do something about it. That decision coincided with the passage of the Bill, so we were able to get the new rules into the Bill. 
 The hon. Gentleman asked why we left any downrating at all. The hon. Member for Northavon also raised that question. We must be mindful of double provision. Downrating applies to a range of 
 other social security benefits, not just those relating to pensioners. It is therefore difficult to argue that it is right to end downrating for pensioners completely while leaving it in place in other benefits. One has to consider the thin-end-of-the-wedge argument when considering the issue because that has implications for many other benefits. 
 I should like to inform the Committee of the numbers that will be affected, as that might be helpful. The six-week rule affects about 35,000 people. We think that about 26,000 of them are pensioners and 9,000 are of working age. We therefore expect about 26,000 people to gain from increasing the threshold to 13 weeks. Obviously, a much smaller number of people will be affected by the 52-week rule, because thankfully most people leave hospital well before 13 weeks have passed, so many fewer people will be affected by the changed rule. 
 The Conservative party was in power for 18 years. It considered the hospital downrating rule but never, as far as I am aware—I am sure that the hon. Member for Daventry will correct me if I am wrong—attempted to abolish hospital downrating for any type of benefit. Clearly, it too was concerned about the rule against double provision.

Tim Boswell: The hon. Lady is putting her case reasonably, and I think that we are all pleased that relaxations have been made. She carefully gave the figures of those who would benefit from the extension from six to 13 weeks, and she said that not that many would be affected after 13 weeks. Will the hon. Lady give the Committee her estimate of the number who will still be caught at 13 weeks, rather than those who are, presumably, unchanged after 52 weeks? It would be useful to have that figure on the record.

Maria Eagle: I have a figure in front of me. We think that about 9,000 people will continue to be affected at the 13-week stage—6,000 of pension age and 3,000 of working age.
 The Conservative Government did not abolish the rule against double provision or end hospital downrating for benefits. However, they did examine hospital downrating. During the late 1980s—the hon. Gentleman will correct me if I am wrong—there was an exercise in standardisation. Benefits had different points at which downrating applied. When that happens, Governments sometimes think that there should be standardisation, and the Conservative Government undertook an exercise on that. Before the exercise, several benefits were downrated at eight weeks, others at six weeks. The Conservative Government decided to standardise at six weeks. Although they made a change to hospital downrating, that was not for the benefit of in-patients who were subject to it—to put it gently. 
 My right hon. Friend the Minister for Pensions can claim credit for having a fair look at the issue and for making a change that benefits significant numbers of affected people. Labour Members are pleased that he has done so, and members of the Committee of all parties have welcomed it. 
 I shall deal with several points made by the hon. Member for Northavon before addressing the detail of 
 the amendments—I do not think that I should miss having the fun of discussing the strange consequences that they would have. The hon. Gentleman asked whether the provision went far enough and whether we should end hospital downrating completely. I should be interested to know whether that is the Liberal Democrats' policy because it would apply not only to pension credit but, in all equity and fairness, to all other benefits. One can imagine the lobbies to which we would all be subjected if we ended hospital downrating on pension benefits but not other social security benefits. There would be a general feeling of inequity. [Interruption.] Unequal treatment indeed. The hon. Gentleman must be suggesting ending hospital downrating for all benefits. 
 I hope that the figures that I mentioned on hospital downrating for pension credit show that it would affect relatively few people. The Government believe that there is a principle in the welfare state of not making double provision. Ending hospital downrating throughout all benefits would breach that rule, and would make it more difficult to argue that we should retain the overlapping benefit rule. I shall not stray too wide of the amendment, but I will say that I do not know whether the hon. Member for Northavon has a policy on ending that rule. Since I entered the Department for Work and Pensions, I have learned that one can come up with many good ideas to end small inequities. However, once costed, they would prove to cost an enormous amount of money—we are usually talking about billions. 
 Of course, we must bear in the mind the impact on the entire system that breaching the principles of the welfare state, such as the overlapping benefit rule and the rule against double provision, would have. The Government are not convinced that we should get rid of the rule against double provision. Are the hon. Gentleman and his party committed to doing so and, if they are, what do they think about overlapping benefit provisions? 
 The hon. Gentleman asked about empirical evidence of the impact of hospital downrating on individual cases. I am not aware of any research that has been carried out specifically to pin down individual cases and try to extrapolate from them across the field of those who are affected, but I will get back to him if I am wrong about that. Over the years, hospital downrating has been driven by the basic principle against double provision. On this matter, I emphasise again that we are talking about only a few people, but I undertake to inform the Committee if there is an empirical study of specific instances. 
 What would be the effects of amendments Nos. 14 and 3? It appears that amendment No. 14, which was tabled by the hon. Member for Daventry, would prevent any hospital downrating for pension credit. It would also prevent a prescribed amount of nil from being awarded to—

Tim Boswell: Prisoners?
 Maria Eagle: Yes, to prisoners, and also to fully maintained members of religious orders; that is the other category.
 On Tuesday, the hon. Gentleman asked me whether the nil prescription would be applied only to hospital downrating. It also applies to monks, nuns and prisoners. Therefore, he might be interested to know that the effect of his amendment would be to induce sin, in some cases. Many religious orders take vows of poverty, and we would be forcing pension credit upon their members. I am sure that the hon. Gentleman would not want to be responsible for promoting sin amongst members of such religious orders. However, that is the other—rather small—category.

Ian McCartney: I hope that my hon. Friend will tell the hon. Gentleman that what she said was a joke; otherwise, we will get lots of letters.

Maria Eagle: I was, of course, kidding. However, that would be one of the effects of the amendment.
 I know that this is a probing amendment, so I do not intend to chide the hon. Gentleman too much, but it would have another slightly strange effect: a person in hospital would continue to receive their pension credit, irrespective of the length of time that they were there, although many other benefits that they might be receiving would be downrated. Therefore, pension credit would be taken out of line with other benefits. 
 Amendment No. 3, which was tabled by the hon. Member for Northavon, is trying to do a similar thing. With regard to that amendment, I wish to point out a remarkable coincidence. Initially, it appeared to be an amendment to clause 3, rather than to clause 2, and it made sense in relation to both clauses, even down to the line to which it referred. That is remarkable; I have never come across that before. Therefore, it was not immediately apparent whether we were dealing with a typing error. We finally managed to establish that the hon. Gentleman did mean it to be an amendment to clause 2, rather than to clause 3. 
 Therefore, the effect of amendment No. 3 would be similar to that of amendment No. 14—but not quite the same. It deals with the sin side of things, because it would enable us to exclude prisoners, monks and nuns, but it would still mean that pensioners who were in hospital for the appropriate amount of time would get their pension credit in full, but not their other benefits or their retirement pension. Therefore, it would have slightly anomalous effects. 
 I hope that the explanations that I have given the Committee are satisfactory, and that the hon. Member for Daventry will withdraw amendment No. 14. However, he must decide about that.

Tim Boswell: I am touched by the Under-Secretary's response because it puts me in the category of sinners, which I would wish to do myself. With regard to that, the only possible exculpation that I can give is to refer to that famous motto that states that if one is to sin, one should be a good sinner, and trust at the same time in the Lord. Her response also sought to suggest that I had led the hon. Member for Northavon, who always informs our debates, into the path of sin. It was not my intention, unless severely provoked, to advise my hon.
 Friends to divide on a point that would have the side-wind effect not only of abolishing downrating in respect of pensions credit but of bringing in the force feeding of pension credits to nuns.
 The Under-Secretary understands that this is in essence a probing amendment, and she has responded broadly in that vein. They are difficult issues of substance, as she rightly says, and I do not wish to suggest that we are uninterested in avoiding double provision. The hon. Member for Northavon raised some legitimate questions about the extent of double provision—and, of course, we have an interest in the overall cost to the social security system.

Andrew Selous: Does my hon. Friend agree that it is at least slightly curious that if a pensioner received a substantial inheritance or had a lottery win at the start of the five years, there would be double provision because he would receive the pension credit until the next review period?

Win Griffiths: Order. Before that point is answered, I wish to raise a technical point. If the hon. Member for Northavon wishes to intervene again, you, Mr. Boswell, should not at this stage beg leave to withdraw the amendment—should that be your intention. You should wait until the hon. Gentleman has resumed his seat.

Tim Boswell: That was very delicately put, Mr. Griffiths. As we are talking about sin, I seem to have become increasingly Jesuitical. I signalled that I would not withdraw the amendment but for the fact that we have an opportunity to return to the subject. However, I to not want to detain the Committee.
 The substantive point is that we understand the interest in double provision; indeed, it is part of social security doctrine going back to 1948. In responding to the hon. Member for Northavon, the Under-Secretary did not really stem concerns about the thin end of the wedge. She might have done; there might be some awful skeletons in the cupboard in other Departments that we have not spotted. However, she was worried about it. I understand the principle although, as my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) pointed out, the reality can be rather different. For instance, a person who entirely legitimately is in receipt of a pensions savings credit may be affluent as a result of a windfall. 
 I shall not tease the Under-Secretary at length about the choice of the 13-week period now, although I might do so under another clause.. One can always ask—indeed, Oppositions always ask—for evidence and precise specification, and it would be difficult for Ministers to give it. However, given that they have extended the period, and given that the Under-Secretary's helpful explication of the figures showed that it is a substantial relief, I concede. I do not want to go further on that, except to say that I am sure that Ministers will want to note the importance of keeping the matter under review, continuing to consider the overall position of pensioners in those circumstances. None of us in Committee have lost interest in the subject, but it is clearly an advance. 
 There is one area that I did not touch on in my opening remarks, which is how the system will operate in practice. The Under-Secretary knows that it was discussed at some length in another place. If the number of persons affected is reduced, that problem would obviously be reduced as well. However, when I first intervened on the hon. Member for Northavon, at the back of my mind was the answer to my parliamentary question to find out more about the restoration of benefit to persons who had been in hospital—for example, how soon they got it back, and so on. The position was not wholly clear or satisfactory. 
 Hospital authorities do not charge persons in receipt of benefit for their hospital services. That would be another way of doing it, but I am not canvassing; I merely say it for the record. However, that raises much wider issues, and you, Mr. Griffiths, would not thank me if I went into them today. Hospitals have no interest in advancing the matter, except in relation to hospital social workers and advising individual patients. The interest lies with individual claimants who must notify the authorities when they go into hospital for more than a short stay and who must reapply for benefit thereafter. 
 Earlier, we discussed persons who went abroad, and I may want to return to the matter of assessment. There is concern that it should be much easier to get pensioners through temporary interruptions in benefit—however well founded—and I hope that a means of doing that will emerge as the Pension Service develops. 
 The Under-Secretary should consider the incidence of outliers in reapplying for benefit. We are discussing people who are convalescing, and their first thought on leaving hospital will not be, ''I must reclaim my benefit.'' They will do that along the way, and the hon. Lady should perhaps think about operational systems that would make it much easier for them to do so. 
 I say no more about that now, but it would be useful if the Under-Secretary could give an indication of her approach to the matter. Even if there has been relief on the general issue, there is still concern that those who come to the end of their qualifying period and go into disbenefit may lose out. 
 I shall make one more point about the continuing review. As regards the overall cost or the benefit to the Exchequer of downrating, I had a slightly irritating answer from the Minister, which did not answer the substance of my question. Nevertheless, in so far as the numbers are reduced, the changes that the Minister has made involve a substantial cost to the Exchequer. As one reduces the number of cases to a minority, the cost to the individual of the downrating increases—the individual case cost increases. Ministers should perhaps bear that in mind. They may reduce the pain of downrating for many people, but they may, if not intensify the pain, at least increase the relative pain for those who remain in the system.

Steve Webb: I shall respond briefly to the Under-Secretary's comments on amendment No. 3. She said that there were three reasons why it would not work. The first related to the principle of double provision,
 but there is clearly no principle at work in the provisions before us. They are, at the least, tempered by pragmatism, and the Government will allow what they see as double provision to go on for 13 weeks. If there is a fundamental, absolute principle at work, why would it not apply in the first week? Because of the effects on the people about whom we are talking. The Government therefore accept that the principle can be breached. Indeed, they have extended the breach of that principle, so it is not a principle at all—we are talking about pragmatism.
 Furthermore, the hon. Lady offered no evidence of double provision. If one is to accept the Government's contention that we must have downrating to avoid double provision, one needs evidence of double provision, but the Minister says that there is none. No one has compared the costs of people being in hospital with those of people living in their own home. There is, therefore, no evidence of double provision, so that fundamental reason for carrying on with downrating is not proven—I think that that is the legal term. 
 The second reason that the Under-Secretary gave was that the amendment would be anomalous. If the Government went through with it, they would get rid of downrating for pensioners, but no one else. However, that reflects the scope of the Bill. We can amend provisions that apply to pensioners on guaranteed credit, but not those that apply to anyone else.

Ian McCartney: The hon. Gentleman is being a bit disingenuous. Changes can be made by regulation. The hon. Gentleman and other colleagues have legitimately raised this issue, but have concentrated solely on older people. The Government took the view, however, that changes should not impact negatively on other groups. We therefore went further than any campaign or this House ever intended us to. We extended provision to all those who have been affected by hospital downrating. That is the best way forward. The hon. Gentleman is content to focus narrowly on one very important group—the largest group. He cannot possibly be serious in saying that the Bill should be amended to give something to pensioners while denying it to others in the same circumstances because they receive another form of income from the state.

Steve Webb: That is a very strange intervention. Clearly, as the Minister just said, pensioners are the biggest group affected by downrating, so it is not surprising that pensioner groups have been pushing the campaign. I am delighted that the Minister came to his office with the desire to do something about the issue—that is great. No pensioner group would have objected to the extension of the principle to non-pensioners, but that is not their client group, nor does such extension fall within the scope of the Bill.
 The Minister says that we can amend the provisions by regulation. He may be aware that the Opposition do not have the power either to introduce regulations or to amend them when they are laid before the House—we are able only to say either yes or no. It is 
 the Government's job to make such amendments and I am concerned that they have failed to do so. 
 If the amendment were passed, we would want the principle to be extended. The Under-Secretary said, ''Ah, but what about the cost?'' She used the term ''billions'' during her speech and then she said that very few people were involved. She cannot have it both ways.

Maria Eagle: I was making a general point when I said ''billions''. As a social security Minister I have found that changes that appear small can sometimes result, when followed through the system, in billions of pounds in costs. I was not suggesting that abolishing hospital downrating would cost billions.

Steve Webb: No, because the Minister knows that it would not cost anything like that much.

Maria Eagle: I did not say it.

Steve Webb: Well, we will not continue to bat back and forth.
 As the Minister said, we are talking about 3,000 non-pensioners and 6,000 pensioners. The principle has already been breached. The measure involves very few people, so the cost would be limited. The Minister has not addressed the issue hinted at by the hon. Member for Daventry, which is that there is a cost to the Government of running hospital downratings. 
 Even if someone reports on day 1 that they have passed the six-week or 13-week mark, the Government have to stop and then reinstate their benefit, which has a cost. If someone were to stay for 14 weeks, I should have thought that the cost of stopping their money would be greater than the money saved by doing so. So it is not clear that the measure will save the Government much money. If someone inadvertently fails to report a long stay in hospital and they end up being overpaid, the Government have to recover that and that costs money as well. 
 There is no great issue of principle involved, because it has already been breached. Hardly any people are involved and no evidence that double provision is occurring has been produced, so I cannot understand the Government's objections. I understand the issues around nuns and prison inmates, which is why they are excluded from the amendment. I feel that no coherent objection to our argument has been made, but it is not my position to decide which amendments in the group we should divide on, so I will leave it at that.

Tim Boswell: I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Tim Boswell: I gave notice, in moving the amendment that we have just discussed, that I would press the Minister on some wider issues concerning clause 2. By way of trailer for later discussions—which may not even take place in Committee, so rapid and telescoped are our considerations—I should say that we may propose putting clauses 2 and 3 together.
 Some Members who would not normally be seen as allies of mine wonder what is going on in conceptual terms. As I understand it, we are essentially extending the minimum income guarantee above the level of minimum income by providing a phased withdrawal in relation to savings income. Yet two separate concepts—the guarantee credit and the savings credit—are addressed in separate clauses. I do not want to debate that matter now, but I should like to pick up on the Under-Secretary's remarks about improvements in the minimum income guarantee. Let us isolate the issue of the savings credit—if that is possible—and consider the criteria for the minimum income guarantee. The essential point is that it is now available above the MIG level, and that is what the Bill effects. 
 It would be helpful if the Under-Secretary could say whether there are any other changes of substance beneficial to pensioners in how the guarantee is made available, and whether any other changes arising from clause 2 are negative for pensioners? I do not canvass any because I do not think that there are any, but it would be helpful if she could give an assurance. Under clause 3 we shall be able to debate the substance of the savings credit. 
 Several hon. Members have already expressed concern about the way in which the guaranteed income traditionally delivered by income support and now delivered by the MIG has been compressed against the entitlement to pension, or that the two have now separated, leaving a gap that the Bill was designed to address. Leaving those macro issues aside, let us consider entitlements and the delivery of the guarantee element of the credit. Will the Under-Secretary tell us whether that has changed, and whether the change is beneficial? We were not heavily lobbied on the matter, and it would be fair to say that clause 2 has almost crept by inadvertently, but it would be useful to discuss that matter before we discuss the savings credit.

Maria Eagle: Clause 2 is creeping by somewhat quickly, which, as the Minister, I should welcome, because we do not want to debate one clause for too long. However, I want to say in more detail why I think that the clause should stand part of the Bill.
 The clause ensures that the minimum income guarantee, which is an anti-poverty measure, is carried forward into pension credit. The meat of the Bill and the changes that it brings about relate more to the savings credit in clause 3. The guarantee credit simply ensures that no one loses out in the system.

Tim Boswell: Can the Under-Secretary give us the explicit assurance that there will be no losers in the system, at least in relation to the guarantee? Perhaps I should have asked that more explicitly in the first place.

Maria Eagle: I can indeed. I am happy to make it clear to the Committee that there will be no losers and that no one will be worse off on the guarantee credit than they would have been under the minimum income guarantee. Perhaps that explains why the hon. Gentleman found it difficult to spot aspects of the
 guarantee credit that were different from those of the minimum income guarantee.
 The hon. Gentleman will be aware that when the Government came to office we were keen on assisting those pensioners at the bottom end of income distribution. We may debate whether his party agrees with the way in which we have undertaken that or even the concept of undertaking that, but that has been our policy. We wanted to get help to those at the poorest end of income distribution as quickly as possible, so we had to build on what was already there—which was income support. 
 We are going further than that now, not only to award savings, which comes under a different part of the Bill, but by ensuring that those who have benefited from MIG do not lose out from the changes that we propose. Clause 2 ensures that no one should be worse off in respect of the guarantee credit than they would have been in MIG. 
 Some problems have been highlighted with regard to MIG that have arisen because it is based on income support. For example, we heard about the 40-page form that asked a female pensioner whether she was pregnant. That happened because the system was based on the income support form and the income support computer system. Of course, we ameliorated those effects in time, but our main priority was to get money to those pensioners at the poorest end of income distribution as quickly as possible, and building on income support was the way to do it.

Tim Boswell: In a sense, the Under-Secretary answered the point that I anticipated making. She has been able to make those changes before legislating in the Bill. The form does not have to be complicated just because it is based on the son or daughter of the old income support form.
 The Under-Secretary mentioned the reference on the form to whether a female pensioner was pregnant. I realise that she used that slightly absurd case to make her point. Of course, as she will know, there is a presumption in law that there is no absolute bar on pregnancy. In the next village to mine, a lady aged 56 gave birth to healthy twins. When considering approximation or even equalisation, we must remember that it is not impossible that at some stage it may be necessary to reintroduce that question into the form. I welcome that, and have no objection to it in principle. My substantive point is that the Under-Secretary was able to make changes under the old format without clause 2.

Maria Eagle: I am sure that my father, who had to cope with twins at a much younger age, would have a great deal of sympathy for the lady in the next village to the hon. Gentleman. It seemed as though he was arguing for the reintroduction of complex forms, although I know that he was not really doing so.
 We reduced the minimum income guarantee form from 40 pages to 10 simply by concentrating on the fact that we want to provide pensioners with services that are relevant to them and are not just tacked on to the working-age services that we provide through income support. That has driven not only the design of pension credit but, for example, the creation of the 
 Pension Service, which will be a public service aimed directly and solely at helping pensioners to meet their needs. Pensioners interacting with the benefit system and trying to claim their entitlements will no longer have to go to offices designed to help those of working age get back into employment, and they will no longer have to fill in forms that are designed to meet the much more varied circumstances of those of working age. We Labour Members think that pensioners will come to value that.

Steve Webb: I should like clarification about pensioners having to go into jobcentres. Pensioners may not like doing that, for understandable reasons, and it may not be appropriate. On Tuesday, when I asked about the face-to-face service that will be available to pensioners immediately, instead of on the third Thursday of the month in the library or whatever, the Minister for Pensions said that that would still be available and would not be taken away. Will the Under-Secretary confirm that pensioners will still have to go to the jobcentre for that face-to-face service? Can she clarify whether there will still be people who understand pensions at jobcentres?

Maria Eagle: Local services and the Pension Service will still be available to everyone. It is true that the Pension Service will do much of its processing work and will hold much of its telephone interaction with members of the public from central locations. There is nothing innovative or terrible about that; it already happens in the case of retirement pensions, in which many pensioners interact perfectly happily on the telephone. There is no doubt that the Pension Service will have a local arm, although it is a national service. Whether it is based in the jobcentre or a different building will vary from place to place. We intend to ensure that those pensioners who would prefer to see someone face to face will have the opportunity to do so at their convenience, rather than at that of those providing the service.
 There will be surgeries and places in the local community to which pensioners can go to meet Pension Service staff if they need to do so face to face. If they need a home visit, that can be arranged. All of us Members of Parliament are subject to such demands from our constituents, and we know that we can always make appointments to see constituents at their convenience. Of course, there are always constraints to do with when we are in the constituency and so on. The idea is that the service that is made available will be tailored to meet the needs and requirements of the individual pensioner. That is our aspiration, and there is no reason why we cannot make it happen. Apparently, a letter has been sent to the hon. Gentleman by my right hon. Friend the Minister for Pensions; I am sure that that deals in greater detail with the concerns that he has raised. 
 Clause 2 introduces the guarantee credit, which is similar to the minimum income guarantee. Primarily, it is an anti-poverty measure; it is intended to ensure that there is a minimum income to which all pensioners are entitled. 
 I could explain all the detailed provisions of clause 2, but I am unsure whether that that would be a productive use of the Committee's time, because I sense that there is not much opposition to the clause. However, I will continue. 
 The clause introduces a calculation of the first element of pension credit, which is the guarantee credit. That will be available to everyone over 60 years of age. It will bring pensioners' incomes up to a basic guaranteed level, which we expect will be £100 for a single pensioner and £154 for a couple. Those rates are continuing to rise, due to the increases that we have introduced since 1997. 
 The guarantee credit will be simpler than the minimum income guarantee, which it replaces. It will remove the numerous rates and premiums, and provide a level of income under which no pensioner needs to live. As it is designed for pensioners rather than for people of working age, it will be possible to get rid of some of the extraneous questions on the form. It will have a simpler structure that will enable the system to minimise intrusion into pensioners' affairs, by only asking them the questions to which answers are really necessary, thereby removing one of the obstacles that prevent pensioners from claiming the money that is rightfully theirs. Another obstacle will also be removed, because it will be much more clearly an entitlement. 
 We also hope that the guarantee credit will tackle pensioner poverty. It will give additional help to those with extra needs, such as severely disabled pensioners, pensioners with caring responsibilities and pensioners with owner-occupier housing costs. Therefore, some beneficial elements of income support additions will be carried forward into the guarantee credit. It will be calculated by making up the difference between the pensioner's income and the guarantee credit. 
 Savings credit is the other fundamental element of the pension credit, and we will discuss that when we address clause 3. I hope that the Committee will support clause 2, as it is a basic building block of the pension credit. 
 Question put and agreed to. 
 Clause 2 ordered to stand part of the Bill.

Clause 3 - Savings credit

Steve Webb: I beg to move amendment No. 1, in page 2, line 42, leave out 'age of 65' and insert 'qualifying age'.

Win Griffiths: With this it will be convenient to consider amendment No. 2, in page 3, line 26, at end insert—
'(6A) In the case of men aged under 65, such regulations shall provide that the calculation of qualifying income shall include an amount equal to the amount of retirement pension that the claimant has accrued at the time of the claim.'.

Steve Webb: The Committee benefits from the fact that the Bill has been considered in another place. A fundamental issue was raised there: the treatment of 60 to 64-year-old women who are excluded from the savings credit under clause 3. These amendments
 address that matter. They are intended to equalise entitlement to the savings element of the pension credit not at 65 years of age, as the Bill proposes, but at the state pension age—although it is clear that that will rise for women.
 The initial effect of the amendments will be to bring everyone over 60 into the scope of the savings credit, rather than to exclude everyone under 65. That will bring in women pensioners of between 60 and 64 years of age, as well as male non-pensioners in that age bracket. 
 The Government say that they have to equalise, and we understand that. The winter fuel payments situation is a good recent example where the Government fell foul of the courts because they did not equalise. They were forced to equalise ex post, which was not desirable. Therefore, we accept that there must be equalisation. However, a question must be answered: should that happen at 65 or at pension age? For the sake of simplicity, I will say ''60'' instead of ''pension age'' throughout the rest of my contribution. 
 It appears that the argument in favour of 65 goes as follows: the Bill is about pensioners, so why should men aged 60 to 64 who are not pensioners get the savings credit? The first response to that is that men aged 60 to 64 who are not state pensioners get guarantee credit. The idea that the state pension credit does not apply to non-pensioners is wrong. A group of non-state pensioners—men aged 60 to 64—get the guarantee credit if they are entitled to it. There is not a principle at stake. People who are not pensioners already benefit from the pension credit. 
 Why should men aged 60 to 64 be excluded from the savings credit element of the pension credit? There is an assumption that to keep non-pensioners out, we must equalise at 65. However, one can think of measures in addition to the guarantee credit, such as the winter fuel payment and concessionary travel, that are aimed at pensioners and equalised at 60, although the equalisation of concessionary travel was forced by a court case. The argument that one cannot include non-pensioners when one equalises is not borne out by other aspects of the system, or even the Bill. Therefore, there is no reason why men aged 60 to 64 should not fall within the scope of the savings credit. 
 The second concern might be what happens to rich men aged 60 to 64 because the measure is designed for pensioners who, on average, are poorer members of society whom the means-tested benefit is designed to help. We do not want to help rich men aged 60 to 64. However, the benefit is means-tested and, therefore, such a person would have pots of money and would not be entitled to the benefit. We are not discussing rich men aged 60 to 64 but relatively poor men between those ages. 
 The question arises: what is the problem? Baroness Hollis implied in another place that part of the integral structure of the state pension credit is that it is built around the state pension. One of the thresholds in the Bill—I forget its name—is the same as the pension. Therefore, if we are addressing a group who do not 
 draw a pension, how can they be given a savings credit that is premised on the assumption that people draw a pension? That is where amendment No. 2 comes in because it would assume that men aged 60 to 64 were drawing the pension that they had accrued so far. 
 The point is slightly subtle and I have had difficulty getting my head around it. However, given the way in which the system is structured, a person who has a pension entitlement that is less than the full entitlement must use their savings to bring them up to that entitlement before they earn pension credit. A man aged 60 to 64 who did not have a pension would not receive savings credit unless he used earnings or pensions to bring himself up to the £77 level of the pension. He would receive savings credit only on the bit above £77. I happily accept that a system that rewards men aged 60 to 64 with more than £77 of savings is peculiar, and that would have been the strange effect if we had tabled only amendment No. 3.

Maria Eagle: We are talking about amendments Nos. 1 and 2, not amendments Nos. 3 and 4.

Steve Webb: I apologise. The Minister is quite right.
 That would have been the strange effect of tabling only amendment No. 1. Amendment No. 2 is designed to address that and would assume that such men were drawing the pension that they had accrued so far. 
 The Minister might say, ''It is a funny business to assume that people are getting a pension when they are not.'' However, on Tuesday she said that the system would do that for 65-year-old men who defer. If a 65-year-old man defers his pension until he is 66 and claims pension credit at 65, the Government will, properly, say, ''We'll assume that you're getting a pension and treat you as though you were getting a pension, even though you're not, because we do not want to give you a barmy advantage for deferring and treat you as though you have no income.'' The principle of assuming that a person gets a pension that he does not receive is implicit in the system. 
 I accept that it is a bit muddy to assume that a person is receiving the pension that they have accrued so far. The phrase ''decrepit computer systems'' may pop up in the next half hour. The phrase is beloved of the Secretary of State because he is fond of saying that computers cannot count—no, not ''count'', although one wonders about that sometimes. I meant to say cannot cope. 
 Many men aged 60 to 64 would have accrued something approaching a full basic state pension. Amendment No. 2 would not assume that they have a full basic state pension because that would entitle them to savings credit to which they might not be entitled if, when they reached 65, they did not have a full basic state pension. Our drafting of the amendment erred on the side of caution, as we are wont to do. For example, we are arguing not that someone who has just swanned into the country should be imputed to be earning a full basic pension and should receive a savings credit for each penny that he had saved, but that people who have worked all their life and have practically accrued a full basic pension should receive a reward for their savings at the age of 60, not 65. I accept that, over 
 time, the 60 years threshold will rise and eventually equalise at 65. 
 We want equalisation at 60 not 65 because of women aged 60 to 64. That is the critical reason behind the amendments. Women pensioners will have listened carefully to the Secretary of State for Work and Pensions announcing the virtues of the pension credit and the savings credit and saying that they are a reward for pensioners who save and that, at last, they will not be worse off than their neighbour. Women aged 60 to 64 will have said, ''Good. That's me.'' The Government made the case that the pension credit would be good news for people who save and that it would get rid of the next-door neighbour problem. 
 It will not. Many woman aged 60 to 64 may think of themselves as pensioners. That is not a strange notion. Let us bear in mind a woman of 62 years who heard the Secretary of State talking about pensioners being rewarded for saving. Perhaps long speeches qualify certain proposals, but headlines do not, and nor does the coverage given to such speeches. The Government have raised an expectation among women aged 60 to 64, and to turn round and tell them, when the system is in place, that they may have to wait five years to be rewarded for saving and until then will be no better off than their next-door neighbour may create resentment. If the amendment were to bring 60 to 64-year-old men into the scope of the proposal, it is worth considering. 
 Can the Minister give us an estimate of the savings credit entitlement of women aged 60 to 64 if the threshold was lowered? That could be used as part of the total cost but, if the proposal really is a reward for saving, pensioners should be given that reward.

James Clappison: In the case of women aged 60 to 64, would it help if we assumed that earnings would be treated in the same way as savings and counted as income towards the system?

Steve Webb: I might need to think about that. We will come back to earnings. The Minister may argue about the cost of the amendment. However, to the extent that it relates to women aged 60 to 64 it is an issue of justice. The Government have raised the expectations of a group of people. They may say that they have made it perfectly clear that savings credit starts at 65, but let us be honest about such matters. If it were said in a ministerial announcement that pensioners were to be rewarded for saving, that is probably as much as people would take in. The idea that there are two components and that one develops at one age while another develops at another, is pushing it a bit. Expectations have been raised and they should be honoured.
 What would be the cost if the proposal related to men aged 60 to 64? We are referring to poorer people. We are imputing a pension. Men who had not contributed to a pension would not receive much savings credit, so we would be rewarding men of that age with small savings. That is not unreasonable and, if they are in the system, it may improve take-up when they are 65. I am talking about equality and dealing 
 with women pensioners who thought that they would be rewarded for saving, but who will not receive that reward until they are 65. There are plenty of precedents, including the Bill, for equalisation at 60 for men who are not state pensioners and imputing in the way set out under amendment No. 2. The fact that people would receive the pension that they had accrued so far would deal with the problem that only those with big savings would receive a reward. The proposal is modest and reasonable and one that the other place has not had the chance to consider in the form set out by the amendment. I commend it to the Committee.

Tim Boswell: The hon. Member for Northavon has put his argument clearly and imparted some ingenuity into his thoughts. I almost became animated when I first thought that I would need to declare an interest to the Committee given that I attained my 60th birthday this year. However, as the hon. Gentleman rightly reminded us, given that I am in receipt of a parliamentary salary, it is relatively unlikely that I would be unable to avail myself of the pension credit, although I suppose that I could invent certain circumstances. I therefore feel no inhibition when speaking about it.
 The hon. Gentleman set out his requirements, which would have been mine, too, for the Under-Secretary to respond about the cost involved. That is not a trivial matter. I referred to it in our earlier debate on double provision. Ministers must have regard to the cheque element. 
 Secondly, as Lord Higgins said in another place, an issue of equity is involved. Equalising the pension age is a delicate issue, but all Committee members accept that whatever is introduced should be equal for people of the same age. That principle is incontestable. The issues are whether we opt at one end or the other, the cost involved and whether the proposal is deliverable. That is a reasonable question to which the Under-Secretary should respond. 
 I would add only one further point, which relates to the legal advice that Ministers have received on the matter. I return jocularly to my forthcoming, but no doubt somewhat delayed, until September next year, winter fuel payment. The matter has arisen simply because the court embarrassed the Government into having to make changes in such a way that they now claim credit for their generosity. It would be out of order to discuss that. However, legal interpretation does not always coincide with that of Governments. Will the Under-Secretary assure us that no legal whoopsy is likely to make a retrospective adjustment necessary, perhaps in relation to women under the age of 65? Might that adjustment be extended to men in that category? I do not have a sufficiently refined legal mind to have the slightest idea whether that is a risk. I understand that the Bill introduces a new benefit that is income contingent, but I should like the Under-Secretary's assurance on that point and her response to the general points made, which should be considered before we move on.

Maria Eagle: ''Whoopsy'' is a legal term that I have not come across before. Perhaps it has been introduced into the law since I allowed my practising certificate to
 lapse. I shall do my best to deal with the points made by the hon. Members for Northavon and for Daventry.
 Amendment No. 1 would make the savings credit available to both men and women from the same age as the guarantee credit—currently 60. The hon. Member for Northavon makes it clear that he accepts the need to equalise, which is essential. I do not believe that it is purely a legal matter—although we are, rightly, open to challenge from all quarters if there is a hint of gender inequality in respect of the provision. Our approach has been driven by trying to ensure that the provision is as equal as possible, not only to prevent us from being challenged in that way but because we believe that there should be equality. 
 The difficulty that we face in trying to work out an approach to the matter is the inequality that remains in basic state pension provision, of which Parliament has taken cognisance. The previous Conservative Government introduced legislation to provide for equalisation in due course. However, as always with pensions, things have to be done over a period, rather than immediately. The intention is that state pension age will rise gradually from 2010 through to 2020. The period from 1995 has been given in order to ensure that women can make proper provision and that there is no adverse effect on people's long-term planning. Until then, however, we have an inequality in basic state pension provision.

Tim Boswell: Is not the real difficulty—and the dilemma with which everyone must wrestle—that, in removing the gender inequality for those below the age of 65, and not extending the provision, irrespective of the cost of doing so, the Under-Secretary introduces a new discrimination between female pensioners under the age of 65 and those above that age? Both may have the same external income and the same entitlement to the basic state retirement pension, but under the proposals the one below that age will not receive the savings credit while the other will. In dealing with the gender issue, she has created an invidious—although, I accept, difficult to solve—discrimination between classes of female pensioners.

Maria Eagle: I hear the hon. Gentleman's point. Equality will not be achieved in general provision until 2020, so it is difficult to devise a way of bringing equality into this provision sooner than that. We discussed different ways of dealing with the inequality inherent in the system. We have all wrestled with the problem and it is clear from the amendments moved by the hon. Member for Northavon that he has also examined it. We went through a similar process of trying to find a way of making the provision as fair as possible, while realising that there is basic inequality in the system on which it is built.
 We looked at the problem with great care, but the lowest age at which the savings credit can be paid equally and fairly is 65, which is what we propose. In any case, men can expect to continue building their pension provision until that age. Therefore, other inequalities are introduced because they would receive a reward on the basis of what is not their full 
 entitlement—because it is continuing to be accrued. The effect of the hon. Gentleman's amendments would be to build in further unfairness, which we cannot do.

Steve Webb: The hon. Lady says that bringing 60 to 64-year-old men into the system on the basis of the pension that they have accrued so far would be unfair. I cannot believe that any of those who receive the money would say, ''No, I do not want it. It is not fair because I might accrue some extra pension.'' They would tolerate the unfairness and thank the Government for bringing them into the system.

Maria Eagle: Until the basic state pension has completed the process of being made gender neutral, there will be inequalities in the system somewhere however we decide to tackle the problem. The difficulty that we face arises because the current state provision is not paid equally to men and women until the age of 65. That is why we have decided to make that the age at which savings credits are paid. Until equality is achieved, there will be an anomaly.

Sandra Osborne: This subject is of concern to many people. I especially hate to see women losing out in any way. However, I recognise the great difficulties involved in trying to reach an equitable solution. Will the Under-Secretary tell us how many women between the ages of 60 and 64 are likely to be affected?
 I admit to some difficulty in following the proposal of the hon. Member for Northavon, which was extremely complicated. I am not sure that it would be workable. The Under-Secretary says that she has examined the issue in detail, so will she tell us the numbers involved and whether the provision would be open to legal challenge if such an amendment was accepted?

Maria Eagle: I shall deal with that point in due course.
 The age of 65 is the first point at which we judge that the savings credit can be fairly and equally paid to ensure that we are not open to legal challenge in respect of gender equality. However, the amount of savings credit depends on the amount of existing state provision. If it were paid to those aged 60 to 64, men and women would have different outcomes solely because of the unequal nature of the state provision. That is the difficulty in making the change suggested by the hon. Member for Northavon. We cannot fairly pay savings credit until an age at which the provision is equal for men and women, which is 65. 
 The hon. Gentleman recognises the problem of paying the credit under that age, because that is what his second amendment seeks to ameliorate. He is with us that far—he has spotted the problem. However, worthy though his amendment is, it would only make things worse. He tries to sort out the problem by saying that we can estimate the amount of basic state pension that a man has accrued on his contribution record 
''at the time of the claim.''
 The amendment would make the problem worse because there would be a huge administrative cost involved in estimating the accrued pension entitlement of 400,000 men. It would also produce unfair results 
 and the kind of effects that we want to avoid. Different amounts of pension credit would be payable to people in otherwise identical circumstances, purely because of the difference between state provision for men and for women. That would open us to the sort of legal challenge to which the hon. Gentleman referred.

Tim Boswell: While not necessarily disagreeing with the dilemmas with which the Under-Secretary is wrestling, I cannot let pass unchallenged the assertion that the potential roll-up of retirement pension for the male approaching retirement age would be difficult to estimate. Surely that is what her Department proposes to do in issuing retirement forecasts.

Maria Eagle: The hon. Gentleman makes some interesting points. The area is difficult and there is no ideal solution. We must ensure that we treat everyone fairly, and if the amendments resulted in people in the same circumstances receiving different amounts because they were male or female, because of the unequal way in which provision works at present, we would not have succeeded in solving the problem. We cannot implement such a system without being open to legal challenge. The first point at which we can ensure that the outcomes are the same is at age 65, in respect of savings credit.

Steve Webb: The Minister is engaging constructively with what we want to achieve with the amendments, but who would launch the legal challenge to which she refers? It would not be the women, because they would be receiving more money—they cannot say that they should have even more because they would be using their actual pension roll-up. It would not be the men, either, because we would have brought them into the system when they would not normally have been included. Who will challenge the provision?

Maria Eagle: The hon. Gentleman is not a lawyer, but if he were he would know that someone will always challenge provisions if the outcome is unequal. Never mind the fact that the system is unequal in that men and women in the same circumstances do not receive the same amount of money—if there were a difference, there would be a man who, although he was benefiting, would claim that he should receive the higher amount. In all conscience as a Government, we cannot proceed on the basis that a legal challenge is possible and that we know that what we are doing is wrong but hope that no one will bring a case. That would not be a responsible way to conduct ourselves in government.
 The other difficulty with the amendment is that it would cause strange outcomes for some recipients. Some men, for example, would be rewarded for their savings while aged between 60 and 64 and have the calculation based on state pension accrued before the end of their working lives. When they reached 65, however, they would find all their savings rewarded less or not at all. There are instances in which a man could receive a savings credit element between 60 and 64 and lose it when he hit 65, which would be difficult to explain. 
 I shall give the hon. Gentleman an example. Let us consider the case of a 64-year-old man who has a £60 personal pension but no basic state pension, because he is not yet 65, and no other income. Based on his contributions to date, he would receive a full basic state pension—that is, he would receive £77 when he was old enough. Under the amendment, he would receive £13.80 savings credit. When he turned 65, he would keep his £60 personal pension and receive his £77 a week basic state pension, so under the amendment his savings credit would be reduced from £13.80 to zero. 
 With the best will in the world, the hon. Gentleman is trying to find a way to include men aged 60 to 64 and to equalise and introduce savings credit at 60 rather than 65. However, the impact on the man in my example would be that he would receive savings credit to begin with, but lose it when he hit state pension retirement age or when he retired.

Steve Webb: As I said, the Under-Secretary is responding helpfully. However, in the case that she has just cited, my argument would be that when the man is aged between 60 and 64, he will have no money other than the £60 pension. The guarantee credit will bring that up to £100. The Minister is saying that he should not be rewarded for having saved because he will lose that reward at 65 when he gets his pension. If the Government's principle is that people should be rewarded for having saved—especially when they have nothing else to live on—why should he not be rewarded for having done so when he is 64? The alternative is that he does not get rewarded for having saved at all—a situation which the Government must surely want to stop.

Maria Eagle: It would be slightly more difficult to persuade that man that he should lose his reward for saving when he gets to 65.

Steve Webb: It would never happen.

Maria Eagle: Anomalous situations would arise from the hon. Gentleman's amendment, in addition to the general problem, which we have already mentioned, of the legislation's being open to challenge because there are different outcomes dependent only on gender.

Annabelle Ewing: I appreciate that one can never exclude the possibility of a legal challenge—I declare an interest in that I am a lawyer, although I am not currently practising—but will the Minister clarify on what grounds such a challenge could be brought? What legislation would form the basis of such a challenge?

Maria Eagle: It is just a matter of equality. The grounds would be the same as those on which other actions have been brought with respect to other benefits—the difference between the pension ages for men and women. There have been cases and we have no reason to think that there will not be further ones. It would not be responsible for us to proceed to implement a system that is blatantly discriminatory on the grounds of gender and hope that no one would challenge it. Although I understand the point made by the hon. Member for Northavon that we will be giving men between the ages of 60 and 65 more money, that is
 not to say that they will be getting quite as much as the women.
 As long there is inequality, there are grounds for a challenge. We cannot cross our fingers and hope that no one challenges the legislation in the courts. Someone almost certainly would and we would not have many legs to stand on when they did. We have examined the issue and there is no way that we can get around the fact that if what we do creates a gender inequality, albeit of a slightly different kind from the existing one, we would be open to challenge. It would not be possible for us to legislate on that basis. The problem is the existing inequality, and problems of this kind will end only when that inequality ends. Parliament has already made provision for that, but this Bill cannot do it any more quickly and does not seek to do so. Therefore, we have to make do until that inequality ends. 
 I was asked what would be the cost of paying savings credit to 60 to 64-year-olds. Based on a 100 per cent. take-up, and including the housing benefit and council tax benefit costs, we think that the measure would cost about £200 million. We estimate that about 300,000 benefit units—Committee members will know what we mean by that—would gain from the savings credit's being paid to 60–64 year-olds. However, that does take away the problems that I have been trying—not as lucidly as I might—to explain in respect of the amendments. 
 I understand why the hon. Member for Northavon wants to equalise provision. We all agree with that. Parliament agrees with that and has made provision for it, but we cannot equalise outcomes until that provision has come into force. The Bill cannot be used to speed up the process of equalising the basic state pension age. The Bill has provisions to ensure that we fit in with that equalisation, which will start soon and will be ongoing. 
 I hope therefore that the hon. Gentleman will understand that we have gone through a similar process to him in trying to ensure that the maximum number of people benefit from the Bill, but we have concluded that, because of the current inequalities in the system, it is impossible to do so except by paying savings credit at 65. In view of that, I hope that the hon. Gentleman will ask leave to withdraw the amendment.

Steve Webb: I thank the Under-Secretary for the spirit in which she responded to the amendment. She gave an example of an anomaly that would have been created under the amendments, but which I believe would not be a problem. Her example was of a person with a £60 private pension who, before the age of 65, had to live on the £60 pension and a top-up that guaranteed him £100. In my world, however, that chap will also receive the maximum pension credit of £13.80. That will give him £113.80. I acknowledge that he will lose the savings credit when he hits 65, but he will start receiving his pension, so he will then have the £77 state pension and a £60 private pension, which will take him up to £137 a week. He will go from £113 a week pre-retirement to £137 post-retirement.
 The Under-Secretary may say that he has lost his savings credit, but I cannot imagine him saying, ''This is not fair; you are taking something away from me.'' He will know that he is £24 a week better off. Indeed, that increase will come from the state: his private pension will not have changed. I understand what the Under-Secretary is driving at—that his savings credit would go—and it does sound strange, but his total income will rise significantly. I am not convinced, however, that he would say, ''It's a scandal, Guv.'' I understand what the Under-Secretary is saying, but people will not object if they are better off once they retire but have still received that welcome pre–65 money. It is not a telling objection. 
 The fundamental objection is that it creates an inequality—a different inequality—that is open to challenge under law. The hon. Lady may say that I am not a lawyer, but the amendment proposes that men and women are treated the same, and that the savings credit should be assessed on the basis of their accrued state pension rights. It so happens that women cannot go on accruing more state pension rights after 60, but men can. The assessment is made indiscriminately, on the basis of the accrued state pension rights on the day when the claim is made. However, the Government have a leg to stand on at least on that issue. I accept that stranger things than that have been challenged, but it is not inherently discriminatory to treat men and women identically and then to assess them on the basis of their accrued rights.

Maria Eagle: The difficulty is that, at a certain stage, women cannot accrue more rights. If a man can receive money under an arrangement that allows him to accrue more rights, that inequality would be open to challenge under the equal treatment directive or the Human Rights Act 1998. It would not be responsible for any Government—I am sure the hon. Gentleman would say the same if he was a Minister—to implement legislation that was open to such a challenge.

Steve Webb: I appreciate that; I suspect that it boils down to a matter of legal opinion, and I am not qualified to adjudicate on that. However, in principle, we have not built in a structural inequality; we are treating men and women in the same way based on their accrued pension rights to date. The Under-Secretary is saying that women cannot accrue any more, but that is about the future. The critical point for me about the amendment is that, when filling out the forms, one would not need to know a person's gender to work out their savings benefit entitlement. Whether male or female, the sums would be done in the same way; the form would ask what was the applicant's accrued state pension right to date. However, I shall not pursue that point; I accept that the hon. Lady will have received legal advice that even that is somehow discriminatory.
 I am grateful for the estimate of £200 million provided by the Under-Secretary. Is that money only for women aged between 60 and 64 with savings, or is it also for men, as proposed in amendment No. 2?

Maria Eagle: It is for both.
 Mr. Webb: It would be helpful to know, not necessarily immediately, the breakdown of that £200 million. I am thinking of the 300,000 people who are women aged between 60 and 64, who will have heard the Secretary of State, who think that they will be rewarded but who will be disappointed. Perhaps she can clarify how many of those 300,000 are women who fall into that category. That would help us to assess how important the amendment is. If most of those people are women who think that they are getting something when they are not, that would add weight to the argument; if only a few of them are, the argument would be much weaker.
 The Department is fond of emphasising that many people stop work well before 65. Many men between the ages of 60 and 64, who are not earning or well off, may have saved, but they will get no reward. Many people retire early, stop work due to ill health or whatever, and we must support them and encourage them to save.

Maria Eagle: About one third of people between 50 and retirement age are not economically active. They are, however, on benefit, and the Government support them. They do not get pension credit because they are not old enough.

Steve Webb: The point is that 60 to 64-year-old men get pension credit, but not the savings credit element. The system says that we should support them, but that we should not reward them for saving. The thrust of the Government's argument is that we should now reward people for saving, but that seems out of kilter with the message that we should not reward those who do so, including women pensioners.
 I shall not pursue the point further. The Under-Secretary has given careful responses to the points that we have raised. I may seek legal opinion on whether the provision could be open to challenge, because this is a fundamental question. At this stage, however, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

James Clappison: I beg to move amendment No. 21, in page 3, line 7, at end insert—
'(2A) The Secretary of State shall as soon as practicable after the end of the fiscal year 2004–05 and as soon as practicable after the end of each year thereafter lay before Parliament a report setting out—
(a) the number of persons with a withdrawal rate of 100 per cent. in respect of income beneath the savings credit threshold, and
(b) the total value of the income concerned.'.

Win Griffiths: With this we may discuss amendment No. 5, in page 3, line 26, at end insert—
'(6A) Such regulations shall provide that, in the calculation of qualifying income, a claimant may substitute for his actual rate of retirement pension an amount equal to the rate of retirement pension that the claimant would have been entitled to if the provisions of paragraph 5(7) of Schedule 3 to the Contributions and Benefits Act (home responsibilities protection) had been in force since the claimant attained the age of 16.'.

James Clappison: It is a great pleasure to serve under your chairmanship again, Mr. Griffiths. I begin by craving your indulgence for a moment. I should be able to deal with my amendment in short order, but it is grouped with an interesting amendment in the name
 of the hon. Member for Northavon. Given the speed of our proceedings this morning, I am not sure whether we shall complete our consideration of the amendments by the time we adjourn. I do not want to hurry the Committee in any way, but I must leave the Committee at 11.30 am to speak in a debate in another part of the House. My hon. Friend the Member for Daventry has agreed to deal with the amendments after that, if we are still debating them.
 Amendment No. 21 is straightforward and deals with the issue, on which we have touched, of those with a 100 per cent. withdrawal rate in respect of income beneath the savings credit threshold. We know that a number of people fall into that category, and it would be useful to know just how many do. The Government might be as interested in that as we are, because part of the justification for introducing the savings credit is to remedy the disincentive created by the operation of the minimum income guarantee on its own on anyone with savings that take them up from the basic state pension of £77 to the minimum income guarantee of £100. That is anyone with savings of £23. Under the minimum income guarantee, such a person would receive no benefit at all from their savings if there was no savings credit. I think that the Government were adverting to that in their consultation paper, when they said: 
''The third—and crucial—stage of the Government's reforms is the introduction of the Pension Credit. There is inevitably a tension between the need to ensure there is a level below which pensioner incomes do not fall, and the need to ensure that today's workers have a clear incentive to save.''
 A 100 per cent. rate of withdrawal for that £23 of savings does not, however, offer any or even an adequate incentive to save: it offers no incentive, because the money is taken off at the rate of 100 per cent. 
 Even after the savings credit has been introduced, some people will still face the 100 per cent. rate of withdrawal. We have covered this issue already, and I do not want to go over old ground, but I should remind the Committee of the facts. The people who fall into this category will include women between the ages of 60 and 65 who have savings and are entitled to the guarantee element of the pension credit, but who receive no benefit for their savings, and people of either sex who have a less than full entitlement to the basic state pension. We have been over that ground, and I need not repeat the point as I am sure that the Committee has it in mind. The point of the amendment is that we need to know how many such people there are.

Steve Webb: Our amendment No. 5 has been grouped with amendment No. 21, which was moved by the hon. Member for Hertsmere (Mr. Clappison). Amendment No. 5 would tackle a group of people who would be covered by amendment No. 21—women with incomplete contribution records.
 I should welcome the information that is asked for in amendment No. 21, which would be helpful. Amendment No. 5 would do something slightly different. I mentioned on Tuesday that I am concerned about women pensioners. All Committee members would agree that, both in the past and 
 present, women pensioners have had a raw deal. When considering poverty and pensioners, one first considers elderly women and widows. I am always looking out for the effect that measures will have on women. All too often, Parliament has failed to think through the effect of pension measures for women. 
 One group that society has historically not valued is women with caring responsibilities. The Government are fond of saying that measures such as the state second pension show their future recognition of the value of caring, and that that recognition will be reflected in the pension scheme in decades to come. Such changes take decades to work through, and women who are coming up to pension age now have the historical baggage of the past 40 years of our society bound up in their pension entitlement. 
 A core example is that of a woman who will hit 60 just as the state pension credit is introduced in October 2003. We must consider when she had her child-bearing years, for want of a better phrase. Home responsibilities protection came in 25 years ago when she was 35, so it is a reasonable assumption that many women now hitting 60 would have had most, if not all, of their children before home responsibilities protection came in. In other words, the state pension entitlement of any woman hitting 60 who has had children is likely to be depressed by years of caring. 
 The system compensates such women to some extent, because if they are single, the means test, or guarantee credit, will top up the pension. Obviously, if they are married, they can get income protection from their husbands' contributions. Even so, many women are reaching pension age with an incomplete contribution record. How should that be treated for the purpose of the savings credit? That is what our amendment is about. We cannot re-write history; these women took time out of the labour market to bring up children at a time when social security did not value that. They brought up children probably in the 60s and early 70s, and they were wrecking their pension rights when they were doing so. 
 Some women opted for the married woman's reduced stamp and saved themselves money when they were contributing. Some of them will have understood that by doing so they were foregoing a future state pension entitlement, but I have clear evidence that many of them did not understand that. I could give many examples, chapter and verse—although I shall not detain the Committee by doing so—from hundreds of women from around the country who have written to me and said, ''I came back after my honeymoon, and the payroll said, 'You're married, love, so you go on the married woman's stamp.''' 
 I am told by the Department that those women had to sign a form, but let us face it, we all sign forms, particularly when we are not very experienced in the workings of the tax benefits system. In many cases, the women signed because the payroll told them that they had to, and many of them did not appreciate what they were doing to their future pension entitlement. Those women are now approaching pension age and write to say that they are astonished when they send off for the pension forecast that we have been talking 
 about, and find that it comes back with pension entitlements worth pennies, literally. I have copies of such pension forecasts. Those women had no idea that that was coming down the track. 
 How will such women be treated under the savings credit? They must supplement their basic pension entitlement with any savings that they have in order to bring them up to the pension level before they are rewarded for their savings. I gave an extreme example of a woman who is entitled to only pennies when she reaches the age of 60, and I have documentary evidence that such women exist.

Kali Mountford: I do not deny that there might be women who, without full information, made decisions that were not to their benefit, but does the hon. Gentleman accept that many women, several of whom I know personally, made conscious decisions that it would be to their immediate benefit to pay less national insurance because that gave their family extra income at the time? Does that build an inequity between women who made a sensible and conscious choice of what they thought was best for their family and women who simply made a mistake?

Steve Webb: I absolutely agree with the hon. Lady. Any remedy to that must distinguish between the two groups. For example, if we allowed people to fill the gaps in their record by buying back missing years, that would deal with her point. People who made a conscious decision not to pay national insurance could get on with it, and those who misunderstood could pay the equivalent amount to what they saved. I do not suggest that we rewrite history and reward those who saved money at the time.
 Mention of the married woman's stamp might have been a red herring. We must think about the group of women who end up under the contribution threshold. However, the second group, who are more important in many ways, are those who stopped work altogether or who did not start work. They were bringing up children but rather than paying a reduced stamp, they paid nothing at all because they did not work. Such women trashed their pension rights in a society that did not value care in the way that it did after 1977 under home responsibilities protection. Women who had not worked or paid national insurance and who were completely outside the system have been punished once by society for not building up their pension rights. However, the Bill would mean not only that such women would be punished by getting a grotty state pension, but that they would not be rewarded for their savings either because the pension is so low that all their savings, which may not be much because many of these women do not have high savings, would bring them up to only the pension level and not entitle them to pension credit. We would hit them twice. 
 The last group of amendments addressed the fact that we are penalising people aged 60 to 64 by excluding them from the savings credit. However, we would also hit women who brought up children by giving them a grotty pension and a grotty savings credit. The amendment would examine what would 
 have happened if the home responsibilities protection rule had applied when the women were bringing up their children. Our society now thinks that what women did then was worth doing and that it was wrong not to recognise that. Although we would not recalculate their pension entitlement—one could argue that we should, but I am going only one step down that track—they should not be penalised for what they did. We should certainly not penalise them twice when legislating for their incomes over the next 30 years. If the amendment were not accepted, a woman who cared for and brought up children would receive no savings credit at the age of 60. The period might not be 30 years because there is the question of what women get from their husbands when they reach 65. However, the period could be five years. 
 When such women's husbands reach state pension age, women receive a 60 per cent. pension based on their husband's contributions. The threshold for a couple is 160 per cent. of the threshold for a single person and, therefore, the issue diminishes substantially. Until the husband reaches 65, however, it is a big issue. Women with what are loosely termed toy-boy husbands—women with husbands who are merely younger than them—will be penalised for at least five years. If a 60-year-old woman has a 60-year-old husband, although that may be an extreme use of the phrase ''toy boy''—[Interruption.] The hon. Member for Daventry is not my idea of a toy boy. 
 If a 60-year-old woman has a 60-year-old husband, she will not receive savings credit during the five years until he is 65. Does the Committee really want to say that a woman's reward for saving is all about the age of her husband? That is not right, given our regard for the independence of women and the value that we place on caring activities. 
 The Minister may say that history cannot be rewritten, that we now have a system in place and that people will just have to lump it. Perhaps I am being slightly uncharitable, but that is the Government's argument. They say that women did not have such protection in the past and that their income is topped up through the minimum income guarantee, so what do women want? Well, let us consider those women who, given that start in life, have still managed to save. It would not have been easy. The fact that they did not have a paid job until they were in their mid–30s or until their children started school would not have been atypical in those days. They would not have saved a great deal anyway. Some women may have a little amount of savings or a pension from when they were 40-years-old. Can we not reward those meagre savings? It would not even cost that much—people seem to be wary when I say that. 
 I hope that the Minister has an estimate in mind? We are not talking about huge sums. I am referring to a group of people who have been penalised once, and I do not want them to be penalised again. The amendment reflects the value of their caring in the way that Parliament accepted was right post–1977. We must not replicate society's attitudes of the 1960s. If 
 the amendment were not accepted, we would be reinforcing those attitudes on the pensioners of 2002.

James Purnell: I refer to a particular aspect of amendment No. 5. I have sympathy with his motives although, in rectifying an anomaly, we may create new anomalies. As my hon. Friend the Member for Colne Valley (Kali Mountford) said, such a proposal may not improve matters. I hate to disappoint the hon. Gentleman; although I agree with what he forecasted Labour Members would say. The best way in which to cope with the anomaly would be to give people a top up through the guarantee credit element.
 I seek assurance from the Minister about the treatment of foster carers. They provide a vital service and deal with some of the most difficult cases that life can throw at people. A constituent of mine has given up her job to take on two teenage boys who have been subjected to fairly significant abuse in two different homes. That is an incredible step to take on behalf of society and, bearing in mind the expenses that carers receive, it is poorly rewarded. The service is not salaried. 
 My constituent was warned that, under the current system, she would lose contributions to her basic state pension. Home responsibilities protection is calculated through passporting from other benefits. If she gave up work to look after her own children, she would receive home responsibilities protection through the receipt of child benefit but, because she does not receive child benefit for fostering children, she does not receive home responsibilities protection. 
 The sensible reaction of people who realised that they were not receiving credits towards their basic state pension—very few people do realise that—might be to save towards a private pension. The problem with the savings credit as it is constructed is that such people may be subjected to a 100 per cent. withdrawal rate on the small income from their private pension. If they were earning less than £77 overall in retirement, the income will be taken away at the rate of 100 per cent. Will the Government consider rectifying the overall situation with regard to foster carers or allow those who have saved towards a private pension to keep a proportion of that pension in retirement? 
 We must continue to attract people into foster caring. I have sat on adoption panels that have had to make terrifying choices about where to place children—such as in foster homes that we were not confident would give them the best possible care or to leave them in care homes. We all know that children in care often have a bleak prospect of educational development and fall back into criminality and drugs. The more that we can attract foster carers into offering their services, the better. If the Government can reassure us that they will consider proposals in respect of the pensions of foster carers, the more progress would be made towards attracting people into the foster care service. 
 It being twenty-five minutes past Eleven o'clock, THE CHAIRMAN adjourned the Committee without Question put, pursuant to the Standing Order. 
 Adjourned till this day at half-past Two o'clock.